Domestic and Foreign Market Access

Overview: Trade Policy and Business Environment

The People’s Republic of Bangladesh is classified as a low income country, which has experienced over 6 per cent of real GDP growth rates for the past few years. It was driven by favourable weather (necessary for agriculture) and strong export growth, especially in the garment industry where Bangladesh expanded its presence in the global market as a low-cost producer. According to the World Economic Forum (WEF) Enabling Trade Index (2012), which measures institutions, policies and services to facilitate trade in countries, Bangladesh was ranked 109th out of 132 countries, while its neighbouring countries, India, Pakistan, and Nepal were ranked respectively, 100th, 116th, and 124th. Even though Bangladesh comparably performed well in market access, it was offset by poor performance in transport and telecommunications infrastructure. The country launched a national policy called ‘Vision 2021’ in which it aims to become a middle-income country by 2021, raising per capita income to USD 2,000 and reducing poverty 15 per cent.

WEF, 2012, Global Enabling Trade Report
WTO, 2012, Trade Policy Review (Bangladesh)

INDICATOR, UNITS RANK/132 SCORE
Domestic Market Access The pillar assesses the level and complexity of a country’s tariff protection as a result of its trade policy. This component includes the effective trade-weighted average tariff applied by a country, the share of goods imported duty free and the complexity of the tariff regime, measured through tariff variance, the prevalence of tariff peaks and specific tariffs, and the number of distinct tariffs. 126 3.37
Foreign Market Access The pillar assesses tariff barriers faced by a country’s exporters in destination markets. It includes the average tariffs faced by the country as well as the margin of preference in destination markets negotiated through bilateral or regional trade agreements or granted in the form of trade preferences. 7 4.25
Tariff rate (%) This indicator is calculated as a trade-weighted average of all the applied tariff rates, including preferential rates that a country applies to the rest of the world. The weights are the trade patterns of the importing country’s reference group (2012 data). An applied tariff is a customs duty that is levied on imports of merchandise goods. 126 13.67
Complexity of tariffs , index 1-7 (best) This indicator is calculated as the average of the following indicators: Tariff dispersion, Specific tariffs and Number of distinct tariffs. See description of each individual indicator for more details. Prior to averaging, values for each indicator were transformed to a 1–7 score, using the min-max method. 33 6.55
Tariffs dispersion (standard deviation) This indicator reflects differences in tariffs across product categories in a country’s tariff structure. The variance is calculated across all the tariffs on imported merchandise goods, at the 6-digit level of the Harmonized Schedule. 88 9.08
Tariffs peaks (%) This indicator is the ratio of the number of tariff lines exceeding three times the average domestic tariff (across all products) to the MFN (most-favoured nation) tariff schedule. The tariff schedule is equal to the total number of tariff lines for each country. These tariffs are revised on a yearly basis. 1 0.00
Specific tariffs (%) This indicator is the ratio of the number of Harmonized System (HS) tariff lines, with at least one specific tariff, to the total number of HS tariff lines. A specific tariff is a tariff rate charged on fixed amount per quantity (as opposed to ad valorem) 72 0.41
Number of distinct tariffs This indicator reflects the number of distinct tariff rates applied by a country to its imports across all sectors. 68 30.00
Share of duty-free imports (%) Share of trade, excluding petroleum, that is imported free of tariff duties, taking into account MFN tariffs and preferential agreements. Tariff data is from 2013 or most recent year available and imports data is from 2012 117 17.06
Tariffs faced (%) This indicator is calculated as the trade-weighted average of the applied tariff rates, including preferential rates that the rest of the world applies to each country. The weights are the trade patterns of the importing country’s reference group (2012 data). A tariff is a customs duty that is levied by the destination country on imports of merchandise goods 13 4.82
Index of margin of preference in destination markets, 0-100 (best) This indicator measures the percentage by which particular imports from one country are subject to lower tariffs than the MFN rate. It is calculated as the average of two components: 1) the trade-weighted average difference between the MFN tariff and the most advantageous preferential duty (advantage score), and 2) the ratio of the advantage score to the trade-weighted average MFN tariff level. This allows capturing both the absolute and the relative margin of preference. 15 60.47
Source : World Economic Forum, Global Enabling Trade Report 2014

Trade Policy and Market Access

Bangladesh’s average applied MFN tariff was 14.9 per cent in 2012. Among non-agricultural products, slightly higher MFN tariffs are imposed on clothing and textiles which are one of its main export products (WTO 2012). As a least developed country (LDC), Bangladesh gains preferential market access from many WTO members under the Generalized System of Preferences (GSP). For example, the European Union (EU) granted duty-free and quota-free access through the Everything But Arms Initiative as well as providing rules of origin that are simplified and relaxed in favour of LDCs. Moreover, the United States of America (US) applied additional preferences under US GSP scheme to Bangladesh. Based on these preferential treatments, Bangladesh concentrated its exports on readymade-garments to the EU and the US markets – concurrently this strategy has raised concerns over a lack of export diversification. At the regional and bilateral level, Bangladesh has negotiated agreements including the South Asian Free Trade Area and it has taken steps to strengthen economic relations with India. However, exports to partner countries have remained limited.

WEF, 2012, Global Enabling Trade Report

WTO, 2012, Trade Policy Review (Bangladesh)

WTO, 2011, Tariff profile (Bangladesh)

Standard Compliance and Other Relevant Import/Export Restrictions

Bangladesh has suffered from insufficient capacity to comply with international standards, which hamper trade. Due to customs houses lacking testing facilities, samples of food and chemical items have to be sent to the Bangladesh Standards and Testing Institute (BSTI). However, a lack of testing equipment in BSTI means the samples have to be sent to public universities or Bangladesh Council of Scientific and Industrial Research. It is necessary to upgrade its existing facilities and develop new facilities at customs houses so that they can facilitate the consignment check and the detection of false declaration. Moreover, Bangladesh is dealing with the challenge of meeting SPS standards of export markets by making efforts with the newly operational Bangladesh Accreditation Board, established under the Bangladesh Accreditation Act of 2006.

WTO, 2012, Trade Policy Review (Bangladesh)